Law Profs Say Government Has Power to Demand Companies Protect Consumer Data


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The Federal Trade Commission’s requirement that companies implement reasonable data security rather than directly telling companies to adopt uniform measures drives innovation and promotes understanding of best practices to protect consumers, a group of law professors from some of the most prestigious law schools in the country told a federal appeals court.

There is an ongoing lawsuit in the U.S. Court of Appeals for the Eleventh Circuit challenging the FTC’s authority to enforce data security standards. The dispute between the FTC and now-defunct medical testing company LabMD Inc. has been heating up since 2013 when the commission filed an administrative complaint after discovering that the company’s patient information was available on a file-sharing network.  In January, businesses, technology groups and other interested parties filed friend of the court briefs in the Eleventh Circuit, challenging the FTC’s authority to regulate cybersecurity and to bring administrative actions against companies. 

On Feb. 16, eight privacy and security law professors—Kenneth A. Bamberger, Woodrow Hartzog, Chris Jay Hoofnagle, William McGeveran, Deirdre K. Mulligan, Paul Ohm, Daniel J. Solove and Peter Swire—filed a brief in support of the FTC.

“The FTC’s approach to data privacy enforcement—requiring companies to implement ‘reasonable’ data security measures rather than forcing every company to implement the same one-size-fits-all measures—is driving corporate innovation and an evolving understanding of best practices to protect consumers’ personal information,” the professors said. The amicus brief presented research results showing that the commission’s broad discretion to enforce data security “spurs companies to hire information privacy and security specialists who then develop evolving best practices.”

Companies would welcome limitations on the commission’s authority or at least clarification about what constitutes reasonable data security. Since the FTC first began enforcing privacy and data security, virtually all targeted companies have elected not to challenge the FTC's enforcement authority, instead entering no-fault consent orders with the commission. An exception is Hotelier Wyndham Worldwide Corp., which challenged the FTC's data security authority under the unfairness prong of Section 5 to take enforcement action against companies over allegedly lax data security practices. Wyndham ended up settling with the FTC in 2015 after the U.S. Court of Appeals for the Third Circuit ruled the agency didn't have to provide a specific reasonable data security standard.

According to the law professors’ brief, however, providing a specific data security standard may not be achievable. Risk in the context of data privacy “arises from the interplay of a variety of factors and manifests itself differently,” they said. Therefore, the professors argued that the regulation of data privacy can’t often be “boiled down to uniform rules governing behavior or mandating particular measureable outcomes.” 

In a recent sit-down exit interview with Bloomberg BNA, departing Director of Bureau of Consumer Protection Jessica Rich said that companies challenging the agency’s authority to bring actions “is not a new thing.” Defending the FTC’s authority, Rich said not only does the FTC have the authority to pursue privacy and data security actions, “it’s the right thing to continue to protect consumers.”

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